JPMorganChaseBankOne?

In a deal worth an estimated $58 billion, J.P. Morgan Chase (NYSE:JPM) announced that it would acquire Chicago-based Bank One (NYSE:ONE) in a stock transaction. The deal will create the second-largest bank in America at $1.08 trillion in assets, smaller than Citigroup (NYSE:C), but larger than Bank of America (NYSE:BAC).

All told, the three would manage more than $3 trillion in assets. To put this in perspective, the entire U.S. gross domestic product stands at about $11 trillion.

That's a whole lot of cabbage parked in just three companies. Do the words "too big to fail" ring in anyone else's ears?

Both Bank One and J.P. Morgan have fairly acquisitive pasts. Bank One sent its management team packing in 1999 after performing miserably following a merger with First Chicago. J.P. Morgan's merger with Chase Manhattan has perhaps predictably failed to produce the economies of scale that management sold to investors as benefits.

In the deal, J.P. Morgan will get a Midwest-centric branch system to complement its network on the East Coast. It will also get about another $500 million in private banking assets under management to go along with its $24 billion portfolio. And it will take over one of the largest credit card operations in the country. (My card's purple.)

The Chicago Tribune ran a fairly insightful piece on the merger, noting that it also furthers the career of Bank One's current CEO Jamie Dimon. By most accounts, Dimon has done a good job cleaning up the mess he found when he arrived at Bank One (its recent implication in the mutual fund scandal notwithstanding), but he's an East Coaster and Citibank alumnus. People in the Midwest have wondered nearly since his arrival what he would do to get back to New York. The most bandied-about theory was that he'd engineer a takeover by Citigroup.

But J.P. Morgan may be a more logical choice. CEO William B. Harrison has been thought for some time to be looking to retire and will do so in 2006 under terms of this agreement. A look at Dimon's contract shows that he stands to benefit from the change in control to the tune of several million dollars. But there won't be much change of control, as Dimon will take over the captain's chair of the combined company upon Harrison's departure.

This combination is a continuation of the merger trend started by Bank of America's takeover of FleetBoston (NYSE:FBF) late last year. It may put more pressure on the big regional banks to find dance partners.